$UAL $DAL $AA – time for buyouts instead of bailouts?

Bloomberg reported yesterday that the major American airlines used their free cash flow for buybacks and may be bankrupt by May.

See this CASH FLOW LINK and this BANKRUPTCY LINK.

Trump is already talking a taxpayer bailout.

How about buyouts instead?

Again and again, these industries (last time it was the banks) recklessly practice free-market capitalism and eventually a crisis comes and again they need a socialist intervention to go on with their business as usual.

Don’t these guys ever plan ahead? Don’t they ever realize all good times come to an end to one degree or another (all bad times too for that matter)?

Isn’t it time for this periodic sucking on the taxpayer tit stops? Maybe a lesson needs to be learned. If the taxpayer is going to have to subsidize and/or finally bail them out in the end, maybe it’s time the taxpayers take ownership.

Not that Trump would know what to do being on the opposite side of his own bankruptcy history but he won’t be President forever (at least I hope American voters have wised up enough to flush the con king).

Anyway, this is what these once high flying birdS look like crash landing together:

(click on the chart for a larger view)

#SectorTrading – when the bear bites everything bleeds

Got the bounce Friday in a frenzied last half hour as suggested Thursday in this post: #MarketTiming $SPY – Buy now, resell later….

No doubt it was primarily short covering but the rapidness of the run-up was bolstered by the announcement that the confused disingenuous Trump Administration is trying to catch up to the actual facts of the Covid-19 virus.

Trump and his team of appointed incompetents had no choice since the scientists within the CDC are coming to the fore and not putting up with the bullshit anymore, and Governors Jay Inslee of Washington State, who Trump called a “snake” (I guess because Inslee was teaching him leadership by example), Andrew Cuomo of New York and Gavin Newsom of Califonia, as well as hundreds of mayors across the country, who could not wait any longer on the dithering Feds, were moving aggressively to confront the virus in order to protect the citizens in each of their states and municipalities.

Regardless, this bounce, even if it becomes a rally is not going to last. As also noted in the post Thursday, the economic damage that’s begun hasn’t even begun to move through the market. Companies may begin warning this week of earning shortfalls.

There are going to be a lot of earnings shortfalls.

The S&P is down 16% for the year, even after Friday’s nine percent bounce. If is FINRA Margin Debt is unraveling (it’s reported a month late), and it probably is, and if history means anything, the S&P has another 30 or so percent to the downside to go over time. Margin calls feed on themselves as the calls bring more selling and more selling brings more margin calls.

The point is it is not buy-the-dips anymore, it’s sell the bounces. Friday’s was a big bounce. Did anyone sell or just started praying for more?

In the meantime, I thought I’d take a look at a few stock sectors I follow to see how bad it’s been even with Friday’s bounce in the numbers. Interesting among the biotechs: both REGN and GILD are up for the year so far, the only glimmers of green. Those are among the drug companies working on a vaccine for the virus. I will get to the tech stocks later. They have held up somewhat but the bear will bite them too before this is over. And the marijuana stocks…ah, the weeds, they are worthy of a blog post all their own.

The tables below are a year-to-date (less than three months). Take note of the percentage decline columns next to of the raging red bars:

BANKING STOCKS

HOUSING STOCKS

ENERGY STOCKS

COAL STOCKS

BIOTECH STOCKS

#MarketTiming $SPY – Buy now, resell later…

Gotta be a bounce if only because it can’t go down forever.

CNN Money’s Fear and Greed Index is at one. One. It can’t go below zero.

Forty-nine of my nifty-50 stock list are on sells with forty-eight of them oversold. I can’t remember 48 oversold all at once before.

The VIX is at 75. That is virtually a bear market momentum number.

The VIX leveraged ETFs, TVIX and UVXY, have been the stars of this market plunge. See the charts below. Since the NYSI downturn 13 trading days ago UVXY is up 40% and TVIX is up 72%

TVIX was at 40 when I posted this advance notice in January – $TVIX – Just a heads up… – and closed today at 399. Absolutely f-ing spectacular if I was so myself.

So what now?

This is a only a guess because I have no actual upturns anywhere – not in the NYMO, let alone the NYSI, not in price, not in volatility, definitely not in fear and greed but this exercise band is stretched so far, the market ether has to crash tomorrow or snap back.

I’m guessing the shorts cover only because they have made so much profit this week and it would be prudent to take some before the weekend.

Could be wrong.

President Incompetent could try to “reassure” the market again, or claim everything is hunky-dory again, or blame Obama again or blame the Fed yet again. (Hell, the Fed fought the NYSI mid-day today and lost that battle big time by the close.) Yes, yes he claims he knows a lot about the stock market but knows nothing so he slam the market down another thousand points or more…again

But if he shuts the tweet up…

My guess is it’s a buy now – not for the long term – and a resell later.

Regardless – tight stops.

(click on the charts for a larger view)

#MarketTiming – From the Kerplunk to a bounce

Warned of a sell-off here back in February 9th in this post:

$SPY – Up, up, up…and KERPLUNK?

Well, the market defied the sell-off warning for a couple of weeks as it ran up past the setup, but that run up is gone now in the rubble of the last four days.

TVIX and UVXY, the leveraged VIX ETFs were backing into the starting blocks, backing into the starting blocks — here $TVIX – Just a heads up… and here $TVIX – Just a heads up… — until finally there were off with TVIX up 92% in the last four days, and UVXY up 67%. I remember when I posted that heads up someone on Twitter or Facebook scoffed at me an told me I basically full of shit (I get a lot of that at market tops).

Now there are stocks all over the place down 20% or more just on market timing. It’s likely nothing as changed at many of those companies since four days ago except for the market sell off. Such is the madness of crowds.

None of this is any surprise really, since there were signs everywhere that the indexes were running on the fumes of AAPL vapor and a, I guess, a whopping TSLA short squeeze (everyone said Elon Musk was crazy, and then it turned out is was more like crazy smart). Over at Virgin Galantic (SPCE), where Richard Branson’s company has put a mere two winged space craft in space for short jaunts, there are passengers buying seats on flying ships to Mars. Say what?

As the indexes made new highs, there were divergences on the NYMO/NYSI, CNN’s Fear and Greed Index, S&P 500 stocks versus their 200-day moving average, and news lows were gradually climbing above new highs before bolting much higher (see the chart below).

Then there is the Coronavirus…and again news comes along like black swans crying when market internals are obviously falling apart.

So what now?

This sell off is so extremely oversold there is going to be a bounce. Likely tomorrow.

Forty-eight of the stocks on my nifty-50 stock list are on sells with 36 individually oversold (that is a lot). The indexes are down more in this four-day thrust than they’ve been in more than a year. It is just too much too quickly.

However, the question is going to be what to do with this bounce? Hang on and hope it’s V-bottom? Or sit on the edge of your seat looking for a chance to SELL EVERYTHING?

The bull market of the past year would suggest the former, everything else suggests the later. But it should be noted that CNN’s Fear and Greed Index is at 22 today. While that’s an “extreme fear” level, it has more room to move down which suggests when the bounce happens, tomorrow or whenever, the low of left behind will be tested, and if by then this is a full-fledged bear market, this bounce is going to be remembered as a last chance to sell for a long time.

P.S. And if it doesn’t bounce? Ai-Yi-Yi!

(click on the chart for a larger view)

#ShortStrangles on #Stocks – day trading the weekly #options

Interesting week last week in the strategy to day trade short strangles on various stocks.

The basic idea with this strategy is limit risk while taking advantage of daily time decay on the calls and puts expiring on each Friday.

The trades are taken 30 minutes into each day and closed at the close. The protective stop is a 5-minute close either above the upper strike or below the lower strike. If a protective stop is hit then both sides are closes on the stop.

Since the opposite strike hedges the losing strike, a stop at that point is usually a breakeven or small loss for the trade, and sometimes, depending how long during the day the trade has run, yields a small profit. When the stop is hit and the trade closed, if there is a enough time left in the day, the strangle can be rewritten and reentered at the next strike levels.

Last week the short strangles were on TSLA, NFLX and SHOP. See the table below for the day-by-day trading.

TSLA stopped out on Thursday for a 3.6% loss on the margin requirement (see the table) but the reentry has a 2% gain before the end of the day, mitigating the initial loss.”

What is obvious is how steady the week was for logging profits. Since this is day trading, the trades are using roughly the same cash margin over and over each day. As a result, although the daily gains for options trading may be relatively small, the accumulated profits for the week can have a notable return.

Margin requirements can vary day by day, strike by strike and, I supposed, broker by broker. Those listed here are calculated on the margin calculator at the CBOE. For presentation purposes, I’ve calculated the dollar amount on these trades as per each contract.

The short TSLA strangles gained 18.79% for the week, SHOP gained 6.52% and NFLX gained 11.03%. See the green blocks on the table to those results.

In the last green block, I averaged the margins across the week and across the three stocks and came up with the $11,857 number. The highest requirement was the $20K per contract on TSLA at the beginning of the week (that would also be the minimum required to trade this for the week).

The total profit for the trades was $4,759 for the week, a yield of 10% on the three strangles combined.

That’s what I meant when I said above it can have a “notable return.”

(click on the table for a larger view)

ON $AAPL gone parabolic – with an updated chart…

This is a followup to the post below as AAPL takes a predictable hit today.

Wrote the following in this link a couple of week ago: On $AAPL Gone Parabolic.

At the risk of a massive understatement, let’s just say AAPL has gone up…a lot.

In fact one look at its chart below reveals is has gone parabolic.

Let’s define a parabolic move first. Basically, according the website, Prometheos Market Insight, when a stock makes a enough of a move to create three distinct supporting trend lines (see the green lines on the chart below), then accelerates, it is in a parabolic move (the red line on the chart).

There is both good news in that, and bad news.

The good news you own it, the bad news its latest rise is unsustainable. Although one can only guess when and at what level it parabola ends (the way it always is with that phenomenon), but when the inevitable end comes it will likely be violent and the stock could eventually go back to where the parabolic began.

At this point, a rough estimate of where it began in AAPL is around $230.

It’s hard to believe it will ever quit going up as it’s wildly (exuberantly) rising, but I would suggest there is no profit here until one sells.

Also, one other thing to keep in mind, AAPL today, according to Yahoo Finance, has a market cap of 1.377 trillion dollars. That in itself is unprecedented in market history, but it is also nearly $100 billion higher than next highest market cap, MSFT (but that as they say is another story).


(CLICK TO SEE A LARGER VIEW OF THE UPDATED CHART)

#ShortStrangles on #Stocks – 11/18 – 11/22

Trades on the strangles for AAPL, FB, TSLA and NFLX were in direct relation to this post below to show how selling naked would work as a hedge on cash alone:

#ShortStrangles on #Stocks – stealing money weekly in cash

It was not a spectacular week but there was a gain 2.3% on total margins for the trades (still, scale that over a year and happiness will reign).

Should note only AAPL steadily decayed through week. FB came within a whisper of being stopped out with a loss but righted itself by Friday and expired worthless. TSLA slightly touched its upper strike stop at 360.84 but sold off so quickly I didn’t close it.

MADE A MISTAKE AND GOT AWAY WITH IT – NOT GOOD

Should have closed NFLX which showed a 47% loss for the position, a 2.8% loss on the margin requirement, but with the stock itself up a virtual six days in a row, wildly overbought and ripe for a bit of end-of-the-week profit taking, so decided to hold it into Friday. Probably because I wrote the post in the link above, I was thinking too much. Not a good thing to do in options trading.

Not honoring the NFLX stop was a mistake and I’m rationalizing its profit since it worked out great but doing that on a regular basis is a road to ruin. Being rewarded for making a mistake makes one think it can be done again…and again…until one comes along and kills you.

THIS WEEK’S STRANGLES:

#ShortStrangles on #Stocks – 10/14-10/18

THIS WEEKS SHORT STRANGLES:

LAST WEEKS RESULTS:

A PERTINENT QUESTION ON TWITTER:

#Stocks – and out of the blue the brokerages fell…

Reportedly, this slam down in the brokerage stock is a result of Charles Schwab (SCHW) announcing a no-commission policy for online trade with presumably its competitors to follow.

And this is precipitated, according to reports, by the brokerage Robin Hood, which has been not charging for trades since its beginning. Robin Hood? Compared to these others, is that even a competitive trading house?

Regardless, SCHW, AMTD, ETFC, and IBKR are (at the moment) down either double-digit percentages or close to it in an out-of-the-blue across-the-board plummet. AMTD is down 23% (Holy cow!).

Whatever.

I would note the NYSI (long-term breadth) is falling. When it is, “accidents” like these often happen.

(click on the chart panel for a larger view)

Short Strangles on Stocks 9/03-9/O6

LAST WEEK’S SHORT STRANGLES:

THIS WEEK’S SHORT STRANGLES:

CHART KEY: The number in the yellow flag on the lower right is the cost of the strangle. The number in the white flag on the lower right is the price gain on the position (a negative number on the shorts is a gain). The number in the green flag on the lower left of each chart in the panel is the percentage gain or loss on the price of the strangle (not accounting for margin needed for the position).

(Click on Chart for a Larger View)